MGT 2070 Assignment 04 - Decision Analysis

Moodle Marked Questions

Question
Method
Q1

Instructions.
Points
0

Q2a
Q2b

20
10

Q2a
Q2b

30
15

Q4a
Q4b

Use POM-QM where

possible and Excel
where necessay

20
10

Q6a
Q6b

35
15
195

Total

Use POM-QM and Excel to do all your calculations.

Use this tabbed Excel spreadsheet provided for your Excel calculations

and to record all your POM output

Where appropriate, some of these tabs contain data for the question.

You must upload the Excel file on completion of the assignment

This file must contain all your work to support answers entered into Moodle.

30
10

Q5a
Q5b

The questions are in the Assignment Moodle Quiz. Q1 is reserved for Excel File Download/Upload.
For those assignments with a manually marked Excel component, the mark will be recorded against Q1.
Put the required answers in the spaces found in the Moodle questions.
Do not abbreviate numbers (if the number is 250000, do not use 250 or 25,

use the actual number - 250000)

Some answers require numerical responses, some require picking from a drop down menu,

some require filling in blanks, others, by clicking on a "radio" button to select the answer.

Q1.

Therefore, by best EMV criteria, University A should go for 1 point. (1 pt)

Q2
Motel
Options
Approved
Rejected
Renew
$4,000,000 $3,000,000
Relocate
$5,000,000 $1,000,000
outcome for i
Probability
0.6 EVUC best0.4
n

i 1

th

state of nature P (Si )

EVPI EVUC EMVMax

EVUC =
$4,200,000
Max Emv = $3,600,000
EVPI =
$600,000

EVUC

= .6(5,000,000) + .4(3,000,000) =$ 4,200,000

Yes, the manager should sign the lease for $200,000 since it is less than the EVPI of $600,000.

Solution: Since $3,600,000 is the maximum EMV, the decision should be to renew.

Q3.
States of Nature
Profit

Very
Favourable
Market

Average
Market

Unfavourable
Market

Alternatives
Build New Plant
Subcontract
Overtime
Do Nothing
Probability
(Payoffs in $000's)

$350
$180
$110
$0
0.5

$240
$90
$60
$0
0.3

($300)
($20)
($10)
$0
0.2
n

EVUC =
Max Emv =
EVPI =
(Payoffs in $000's)

$247
$187
$60

EVUC best outcome for i th state of nature P (Si )

EVUC = 0(.2) + 240(.3) + 350(.5) = $ 247

i 1

EVPI EVUC EMVMax

Interpretation: $ 60 (000) should be the upper limit of what the company is willing to spend to find out the demand.

Solution: Since $ 187 is the maximum EMV (the why), the decision should be to Build A New Plant.

Q4.

Therefore, by best EMV criteria, Bo should settle.

Q5.

Therefore, by best EMV criteria, PCE should use a strategy of not doing the test market and marketing the new salad dressing.